What is Retroactive Cover?

Retroactive cover, also known as "retroactive date cover," is a provision in a Professional Indemnity insurance policy that extends coverage to claims arising from professional activities performed before the policy's start date. This means that if an accountant or bookkeeper made an error or omission in their work prior to obtaining the PI insurance, any claims arising from that past work can still be covered, provided the error occurred after the retroactive date specified in the policy.

Why is Retroactive Cover Important?

1. Protection Against Past Mistakes: Financial professionals often handle complex and sensitive data, and even a small mistake can lead to significant financial consequences for clients. Retroactive cover ensures that if a past error comes to light after the policy is in place, the accountant or bookkeeper is protected against claims related to that mistake.

1. Continuity of Coverage: For those who switch insurance providers or renew their policies, maintaining retroactive cover is essential. It ensures there is no gap in protection, covering work done under previous policies. This continuity is vital for accountants and bookkeepers who want to ensure their entire professional history is protected.

1. Client Confidence: Clients trust accountants and bookkeepers with critical financial information and expect them to be fully covered against any eventualities. Knowing that a professional has retroactive cover enhances client confidence, demonstrating that the accountant or bookkeeper is prepared for any issues, even those from past work.

1. Mitigating Financial Risk: Without retroactive cover, accountants and bookkeepers would have to bear the full financial burden of claims related to past work. This could include legal fees, compensation costs, and other related expenses, which can be financially devastating. Retroactive cover mitigates this risk, providing financial security and peace of mind.

1. Professional Reputation: Handling claims efficiently and effectively is crucial to maintaining a professional reputation. Retroactive cover helps ensure that any claims related to past work are managed and resolved without significant impact on the professional's reputation.

How to Ensure Adequate Retroactive Cover

When obtaining or renewing PI insurance, accountants and bookkeepers should:

• Check the Retroactive Date: Ensure the policy specifies an appropriate retroactive date that covers the entire period of their professional practice. This date is usually negotiated at the start of the policy and should align with the beginning of their professional activities.

• Maintain Continuous Coverage: Avoid lapses in coverage by renewing the policy on time. Gaps in coverage can result in losing retroactive protection, leaving past work vulnerable to claims.

When applying for a policy through our website, you may see a question ‘What date did you become a Member in Practice of the AAT?’ Essentially the insurers are wanting to ascertain what date you became a member of the AAT, and therefore what your retroactive date would be in the policy documents. If this is your first policy, then you would add the date of application to this question, and once approved have this date updated to the date confirmed by the AAT by contacting our administration team on info@trafalgarinsurance.co.uk.  

The policy provided by ‘Trafalgar Insurance Company Limited’ (the PI insurer of the policy) has been tailor made to suit the needs of an AAT member, and to fit the specific requirements of the AAT, due to our (TRM’s) direct partnership with the AAT.

To get a quote, or to find out more information, please visit our website: www.aatpi.com